Agtech businesses turn to charity for capital

Agriculture technology entrepreneurs are turning to charity to raise funds for their projects as investment into the industry remains low.

Jeremiah Nyachuru, chief executive of Canna Enterprises, an underground irrigation agtech company, contacted Agri Investor about a 10-kilometre marathon he is running in July to raise £50,200 for the start-up firm.

Other agtech entrepreneurs are turning to crowdfunding platforms to raise funds through donations. Paul Jinman, an Australian entrepreneur, is trying to raise A$100,000 ($94,000; €69,000) for his River Stomach Floating Farm System on IndieGoGo. His project aims to clean rivers by producing algae that can also be used as biofuel.

Another company listed on IndieGoGo is raising funds for a biomass power generator that can produce renewable energy from coconut waste.

Authors of a recent report by the Ewing Marion Kauffman Foundation are surprised that agtech companies are still receiving so little funding from the investment community, but are hopeful this will soon change.

“The agriculture sector as a whole is one of the world’s largest economic sectors, with net farm income of around $120 billion and farm assets at around $2 trillion with little leverage. Yet there has been relatively little investment in agtech compared with other industries like clean energy,” reads the report.

“Venture capital firms compiling portfolios of new agtech companies are seeing more start-ups seeking funding than available capital, and other investor groups thus far have not entered the field in significant numbers,” the report continues. “Given the size of the potential market and the vital societal need for agricultural innovation, we expect that investors soon will realise the opportunity of agtech and invest substantially in this emerging field.”

Investors have been wary of investing into agtech companies in the past due to a low knowledge base of the sector, according to asset managers and consultants. For Canna Enterprise the issue has been low sales volumes, according to Nyachuru. “We have been to the bank and other conventional lenders, but they haven’t wanted to invest. They want us to have proven sales, [but] we need funding to improve sales so it’s a cycle. At present we are unable to move forward,” he told Agri Investor.

AgFunder, a fundraising platform that launched earlier this year, has found a happy medium. Styled like a crowdfunding platform but offering investors a share or stake in the investee company, the firm offers investments in agriculture-related companies. It closed its first deal, $800,000 in convertible notes for OnFarm, an agriculture data company, in April.